A Welcome to the Latest Edition of Production and Financial Standards

The U.S. pork industry continues to face immense change. As it does, pork producers are increasingly challenged to reposition their businesses. To be sure, the pork industry is moving away from a production-driven, commodity business and more toward a value-added, consumer-driven industry. It has become evident to many that a set of production and financial standards are needed to establish a solid

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The U.S. pork industry continues to face immense change. As it does, pork producers are increasingly challenged to reposition their businesses. To be sure, the pork industry is moving away from a production-driven, commodity business and more toward a value-added, consumer-driven industry.

It has become evident to many that a set of production and financial standards are needed to establish a solid knowledge base for the pork industry. If producers wish to participate in value chains, it is imperative to know their costs, track inventory, etc.

When the standards initiative began in 1995, many difficult issues were discussed. After much discussion, acceptable, standardized production and financial parameters were agreed upon. Task force members understood the standards must apply across geographical boundaries, worldwide.

Ultimately the goal of the standards is to allow producers, lenders, consultants, educators and other allied industry representatives to speak the same language when comparing production and financial business matters. For the first time, the National Pork Producers Council (NPPC) standard terminology, calculations and reports provide a level playing field for benchmarking performance across all types of pork production systems.

The National Pork Database has been developed with standardized information. This uniformity permits collection of data for historical tracking and comparative analysis. Industry benchmarks are being developed, arming producers with information never before available.

The National Pork Database eliminates the “Grand Liars Club.” All data enters the database through a mechanism called Pork Office (see page 44). Data is extracted from producers' actual records, checked for accuracy and standardized. The result is true, standardized production and financial benchmarks.

To measure progress in terms of production goals, costs and earnings competitiveness, accurate industry benchmarks will be necessary. Knowledge of how an operation stacks up against others regarding labor use efficiency, production costs, capital investment, leverage, return on assets and return on equity, in addition to traditional productivity and efficiency measures can provide producers with the competitive edge.

The standards are in place. The educational process is being tested with 22 producer classes currently meeting throughout the U.S.

The process of testing and updating the information and formulas is ongoing. Continuous updates and program development will help pork producers and their allied industries keep pace in this dynamic industry.

Cooperation of software developers together with the graduated adoption of the pork enterprise chart of financial accounts by producers is essential to the integration of production and financial information systems.

The availability and use of integrated production and financial information will put the pork industry on par with other manufacturing industries. Farm-level management decisions increasingly will be influenced by considerations of profitability, less on the productivity measures as in the past.

Consistency among financial and production measures (including new measures combining both aspects) will improve financial lenders' understanding of and confidence in numbers generated by information systems.

Adoption of the NPPC Production and Financial Standards by developers and publishers of pork enterprise production records systems and farm financial accounting software packages will enable meaningful comparisons among herds using different brands of software. Consequently, it will be possible to compile pork industry databases and statistically sound benchmarks to set goals for improving productivity and profitability.

This Platinum edition of “Production and Financial Standards for the Pork Industry” marks the third complete edition National Hog Farmer has devoted solely to this checkoff-funded, NPPC-driven initiative.

Now it is up to all pork industry stakeholders to seize this opportunity and adopt standard terminology and financial accounting practices so that we can communicate information and use of our knowledge to explore ways of achieving and maintaining competitive advantages in a rapidly changing world.